Bank of England deputy needs City expertise, claims George Osborne

Alistair Darling must move the Bank of England's financial stability chief in favour of someone with extensive City experience, the Shadow Chancellor said.

George Osborne urged Mr Darling to appoint an executive with "significant experience of financial markets" as one of the Bank's two deputy governors.

In a letter to Mr Darling, Mr Osborne said that following the credit crunch and the Northern Rock fiasco, the new appointee to the Bank and the Monetary Policy Committee must have a "real understanding of the City".

In what may be seen as a slight to Sir John Gieve, the deputy governor for financial stability, Mr Osborne recommended the Chancellor's new appointment takes on his remit, leaving Sir John to take charge of the soon-to-be-vacant monetary policy role.

Rachel Lomax confirmed she intends to stand down when her five-year term finishes at the end of next month. Insiders are extremely worried her place on the Monetary Policy Committee will be left vacant for the July meeting.

Mr Osborne said: "Since the Deputy Governor appointed this summer may well serve the majority of their term under a Conservative Government, I want to propose that you take this opportunity to appoint a Deputy Governor with significant experience of financial markets inside or outside the Bank. This will necessitate moving the current Deputy Governor with responsibility for financial stability, Sir John Gieve, to the other Deputy Governor post.

''At this time of turbulence in financial markets, and given the weaknesses that have now been exposed in the tripartite structure, I believe it is critical that we have someone with a real understanding of the City in this important job in the Bank. Indeed, in future, it should be the case that this Deputy Governor post is always filled by someone with financial expertise."

Sir John and Ms Lomax are former senior civil servants, and the Treasury Select Committee has recommended that these positions, which are decided by the Government, are instead filled by experts, whether insiders or outsiders. Its chairman John McFall criticised Sir John for his handling of the Northern Rock crisis, though many in the Bank and Whitehall have been supportive of the deputy governor.

With Bank Governor Mervyn King having recommended that Ms Lomax's replacement comes from inside the institution, one of the favourites is Paul Tucker, the Bank's executive director for markets who is highly regarded in the City and on Wall Street.

Geoffrey Dicks of Royal Bank of Scotland said he thought the Bank's chief economist, Charlie Bean, was the ideal candidate.